Top 10 Technology Trends for Advisors and Their Partners: Pt. 9, Social Media

Advisors can, and are, using social media for serious business purposes. Heres how to take advantage of the benefits of social media, and how to avoid its dangers.

By Spenser Segal|July 25, 2012 at 09:51 PM

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In the previous post of our twelve-part blog series on the Top 10 Technology Trends for advisors and their partners, we explored outsourcing, an increasingly mainstream way of getting more done for less. The eighth trend we will discuss in this post is social media.

Unless you’ve been living on a deserted island for the past few years, you know that social networking and social media is all the rage. It seems you can’t turn on the evening news without hearing “Twitter this” or “Facebook that.” With many technology trends, financial services firms have entered the market slowly, because of the unknown compliance and regulatory risks. Despite those risks, financial institutions and advisors are increasingly using social media including LinkedIn, Facebook, Twitter, Chatter and other services.

For those in the financial services industry, there are really two core uses for social media. The first is an obvious one, as a new medium for communication. The second is less obvious but just as powerful, and that is as an intelligence gathering tool.

Social Media and Client ExpectationsAdvisors are being asked to participate in social media as a communications medium —sometimes reluctantly—by clients. In years past, it might have been acceptable to communicate with clients once a quarter. With the advent of email, cell phones and online account access, clients expected more frequent investment and general account updates; maybe once a month or even weekly.

However, with the popularization of social media, more and more clients want instant access to an advisor. For example, if news comes out about a company in which a client owns stock, some clients may expect near instant communication from her advisor about what the news means to the client’s portfolio. You probably don’t have too many clients with this expectation today. Yet as more and more young people who have grown up on text messaging and Facebook start hiring financial professionals, you can be sure that these will be client expectations in the coming years. Obviously these are unrealistic. However, the social media/instant communication trend means that it is the advisor’s responsibility to set client communication expectations.

Social Media and Internal CommunicationsSocial media also plays a role in internal employee communications. As employees become more and more accustomed to viewing the daily lives of their friends and commenting on others’ posts/information, private social media-like tools are replacing in-person meetings and email as a form of employee interaction in the business environment.

For example, software like Yammer and Chatter make it easy for employees to share what they’re working on, and it allows others to communicate the statud of a project status, for instance, in real time, often integrated within a company’s CRM system. Online collaboration tools like Tracky provide full project management capabilities using a private Twitter interface that is easy to use and is very collaborative in nature.

Social Media and MarketingThe most obvious role that the social media trend plays is with marketing. It is now easier than ever for advisors to cost-effectively communicate with clients and prospects. It’s easy and free to link with clients and prospects on LinkedIn, follow others on Twitter, post messages on Facebook, etc. Because social media is so informal, the danger is that the advisor risks being ‘friends’ on social media where too much personal information can be shared, versus maintaining a professional relationship.

As a marketing vehicle, social media must be considered like any form of advertising and thus falls under the same compliance regulations and guidelines. If your firm says that a brochure needs to be approved, then your post on Twitter probably needs to be pre-approved. If your firm requires you to archive every marketing email you send, then you most likely need to have software that automatically and permanently archives every Facebook post.

Social Media and Its DangersIn addition to maintaining legal compliance, anyone in business—and advisors in particular—needs to be very careful what they post online because of ‘reputational compliance.’ It’s important to remember that anything in digital format is probably archived, and thus searchable, forever.

As you probably know, the majority of communication effectiveness occurs non-verbally and via tone of voice. For example, calling someone a jerk can have two different meanings: one if you have a scowl on your face and if you deliver the message in a deep, angry tone; another if you have a smile, pat your friend on the back, and have an upbeat tone. Obviously tone of voice and non-verbal communication is lost in social media communication, even if you use emoticons like “smiley faces” J in your posts.

Thus, a joke that you relate to a client or prospect that might be very funny in person could be taken completely the wrong way online, out of context. Other posts can be dangerous as well. Ever share a political comment online? That’s fine. Just know you could be alienating 51% or 49% of your potential prospects, depending on where you live. Did you Tweet about poor customer service you received at a local restaurant? Your rant may be perceived as ‘whiny’ or immature by your clients.

As you participate in the social media trend, it’s important to remember the ‘Newspaper Test.”’ Basically, you need to ask yourself this question: “Would what I’m about to post online embarrass me if it were on the front page of tomorrow’s newspaper?” If the answer is yes, then don’t post it. Here’s another good practice to implement: if you ever have a question about sending something in digital format—a text, a post, a Tweet, a blog comment—write what you want to see in an email and send it to yourself first. Then wait a few minutes, or even a day, and then read the email. Almost 100% of the time, you’ll probably decide to revise your comment or not send it at all.

Social Media and Referrals For advisors, another use of social media is as an intelligence gathering tool. In years past, when you met with a new prospect, you had about as much information on the individual as what your referral source (if that’s where the lead came from) told you. If you were meeting with an existing client, your information gathering was pretty much limited to questions that you asked during your in-person meeting. With social media, that has now all changed.

For example, if you’re meeting with a new prospect who is a business executive, it’s highly likely that the individual has a LinkedIn account that you can review prior to the meeting. By doing some homework, you will know the prospect’s work history, education, their likes/dislikes, and even personal information before you walk in the room. Used correctly, this information allows you to connect on a more meaningful level, ensures relevancy, and gives you permission to ask more personal, values-based questions.

For existing clients, you can now easily track what’s going on in their lives by following clients on Twitter, LinkedIn, Facebook, Google+, Pinterest and other social networks. When your review meeting comes along, you’ll already know about your client’s upcoming vacation, how their child is doing in school, movies your client recently saw and their favorite new restaurant. You may also learn about your client’s political feelings, religious affiliation and other highly personal information. Again, used correctly, this information can help you form better questions, provide relevant ideas or advice and help you connect with clients in a more personal manner. (Of course, if you use it incorrectly your clients will think you’re spying on them, but that is a separate issue altogether.)

By connecting with your clients via social media, you also gain another very powerful benefit. You know who your clients know. For example, when you connect with your clients on LinkedIn and Facebook, you can see who their business and personal connections are. Said in another way, you can ‘mine’ your clients for leads.

According to Julie Littlechild’s AdvisorImpact, less than 2% of advisors actually ask their clients for referrals by name. Asking a client if they know anyone who could use your services is uncomfortable for both you and your client. Saying something like “as you know, we’re connected on LinkedIn and I see that you know Julie Jones. How well do you know Julie? How would you feel about making an introduction to her?” could be a much more comfortable referrals approach for both you and your client. When you ask for referrals by name, you are much more likely to get a hot or at least warm prospect lead which ultimately builds upon itself as you gain more clients, and link with those clients via social networks.

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